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USD/JPY ground up from 109.00 to flicker above 110.00 in late NY

Mon, Aug 25 2008, 06:48 GMT
by Westpac Institutional Bank Team

Westpac Institutional Bank

News and views

A nearly $7 slide in NYMEX crude oil prices and a not entirely coincidental equity rally (DJIA +198pts) helped USD Index rise 0.8% from London into the NY close. The dollar was also boosted by a news report that Korea Development Bank was considering investment in Lehman Bros (some reports suggested buying the whole company). The S&P 500 Financials Index rose 3.1%. The dollar softened slightly on Fed chairman Bernanke’s wary tone on the continuing “financial storm”. The New Zealand dollar steadily lost ground vs USD, from 0.7180 in the London morning to close the week at 0.7088.

AUD/USD shed about a cent at the same time, finishing at 0.8665, not far off its lows. The 0.8650 area found buyers as it did on Thursday.

EUR/USD ratcheted down from 1.4869-80 to a 1.4758 low, finishing at 1.4793.

USD/JPY ground up from 109.00 to flicker above 110.00 in late NY.

US Fed chief Bernanke kicks off Jackson Hole symposium. In his address “Reducing Systemic Risk” he described the past year as “one of the most challenging economic and policy environments in memory”.

Bank of Japan minutes outline new communication vehicles. The Bank will release statements even when there has been no change in policy; the semi-annual outlook forecast horizon will be extended by a further year; and they will be updated quarterly with information on the distribution of views. Otherwise, the minutes were low key, other than the interim assessment of the Outlook projection. The board judged that activity was weaker than projected and prices had been stronger than projected.

Euroland industrial orders down 0.3% in June. Not a big fall, but still the fourth decline in five months, and enough to pull the annual pace of decline down to –7.4% yr. In other news, the current account remained deeply in deficit in June, at €8.2bn. At this rate, Europe could record a full-year deficit, although lower energy import prices in H2 2008 might yet prevent that.

UK GDP growth revised down from 0.2% to nothing in Q2. Private consumption fell 0.1%, investment was down 5.3% and both exports and imports fell. GDP growth would have been negative were it not for inventory accumulation.

Outlook

NZD should be range-bound to a little firmer near term, after recent NZ data fell short of the gloomiest scenarios. We are neutral on NZD TWI but NZD/USD should find buyers on dips.

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Published on  Mon, Aug 25 2008, 06:54 GMT